New Phenomenon in Developed Nations: Citizens Flocking Towards Bankruptcy

A new phenomenon is emerging in the developed nation of New Zealand. Despite being known for its high level of welfare, the country is expected to face a rising number of personal bankruptcies in the coming years. This situation arises amid a trend of declining bankruptcy figures over the past several years. Recent data shows the number of personal bankruptcies in New Zealand has fallen drastically from over 3,000 cases in the 2017/2018 fiscal year to fewer than 1,500 cases in 2024/2025. However, at the same time, applications to withdraw KiwiSaver retirement funds due to financial hardship have hit a record high. Current economic pressures have led to massive withdrawals from KiwiSaver, a government-backed voluntary retirement savings scheme. Jake Lilley, a spokesperson for the financial mentoring network Fincap, noted that based on financial mentors’ observations, many people prefer withdrawing their KiwiSaver funds over undergoing other forms of insolvency, such as the no-asset procedure. Lilley added that many people still view bankruptcy as a stigma and therefore avoid the process, even though in some cases it might be a better long-term solution. He added that a recent survey showed approximately 40% of financial mentors’ working hours are now spent helping people apply for KiwiSaver withdrawals due to economic pressure. Meanwhile, Simplicity Chief Economist Shamubeel Eaqub assessed that using retirement funds to avoid a worse financial situation is not a negative move, especially since the money belongs to the citizens themselves. ‘It is their own money. Most of the applications we see are related to job loss or serious health issues,’ he said. Although bankruptcy numbers are down, pressure on household finances remains high. DebtFix insolvency specialist Christine Liggins revealed that around 450,000 New Zealanders are still behind on their monthly debt repayments. She predicts the number of personal bankruptcies could rise in the coming years. One trigger is the tax authority’s increasingly aggressive pursuit of companies with tax arrears, which could impact small business owners who end up having to declare personal bankruptcy. Liggins even believes the current insolvency system is no longer fit for modern society’s needs. She suggested the government should develop a more flexible debt resolution mechanism without labelling individuals as ‘bankrupt’ for years.